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Why Gol Linhas Aereas Inteligentes Stock Rose 10% This Morning

By Rich Smith – Jun 1, 2020 at 12:21PM

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The move may be a reaction to a downward shift last week.

What happened

Shares of Brazilian airline Gol Linhas Aereas Inteligentes (GOL 4.60%) popped more than 10% in early trading Monday morning, and remain up a healthy 8.6% as of 11:35 a.m. EDT. But why is Gol stock up at all?

That's not immediately clear.

With nearly 515,000 reported coronavirus infections and more than 29,000 related deaths, Brazil remains a hot spot for COVID-19. That's not really great news for Brazil, or for airline stocks in general, or for Gol in particular.  

The silhouette of an airplane flies among coronavirus viroids.

Image source: Getty Images.

So what

That being said, Gol stock got hit last week when it was reported that the bankruptcy of another airline, Chile-based LATAM Airlines (NYSE: LTM), could complicate Brazil's plan to grant a financial bailout to airlines flying into and out of Brazil. In addition to LATAM, Gol joins Brazilian flyer Azul (AZUL 3.50%) in seeking a bailout.  

Reuters noted that complications arising from LATAM's bankruptcy could make it harder to iron out the details of a bailout for the other two carriers until at least late June. The risk that Gol might not survive that long, and might follow LATAM into bankruptcy court before Brazil has a chance to rescue it, presumably weighed on Gol shares last week.

Now what

Can Gol survive long enough for Brazil to bail it out? According to data from S&P Global Market Intelligence, the company has more than $300 million in cash available to it, but more than $3.1 billion in debt -- not the best situation to be heading into a recession. That being said, LATAM's debt burden is even bigger ($9.1 billion, net of cash on hand), and Azul is in a somewhat worse position than Gol as well (with $3.6 billion in net debt).

Regarding debt at least, it looks to me like Gol might actually be the strongest of the three airlines -- and that could be why investors are giving Gol stock a second look this morning.

Rich Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Gol Linhas Aéreas Inteligentes S.A. Stock Quote
Gol Linhas Aéreas Inteligentes S.A.
GOL
$3.29 (4.60%) $0.14
Azul S.A. Stock Quote
Azul S.A.
AZUL
$8.29 (3.50%) $0.28

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